Investors double down on stocks, pushing margin debt to record(wsj.com)
wsj.com
Investors double down on stocks, pushing margin debt to record
https://www.wsj.com/articles/investors-double-down-on-stocks-pushing-margin-debt-to-record-11609077600
134 comments
> 3) We're witnessing one of the greatest wealth transfers in the history of our country, from the less fortunate to those with means,
Those without means are the ones mostly getting unemployment benefits and the other benefits, paid for by taxes, i.e., paid for by the most affluent. Then when they retire, they will get SS benefits, which again is progressive, i.e., a slight transfer of wealth from the richer to poorer.
Also the less fortunate benefit from a whole host of post-tax transfer programs to assist them, also paid for by the more/most fortunate.
Finally, both pre and post tax household income has grown for all quintiles for some time. So if the rich are somehow taking money from the poor and leaving the poor richer, it would be an amazing feat.
Those without means are the ones mostly getting unemployment benefits and the other benefits, paid for by taxes, i.e., paid for by the most affluent. Then when they retire, they will get SS benefits, which again is progressive, i.e., a slight transfer of wealth from the richer to poorer.
Also the less fortunate benefit from a whole host of post-tax transfer programs to assist them, also paid for by the more/most fortunate.
Finally, both pre and post tax household income has grown for all quintiles for some time. So if the rich are somehow taking money from the poor and leaving the poor richer, it would be an amazing feat.
You’re not taking asset inflation into account.
Prices of consumer goods may be flat, and nominal income may be increasing, but workers increasingly can’t afford housing.
Also, as someone that refinanced a house this year, I can assure you the wealthy are receiving much larger payments than the working class got from their stimulus checks.
Prices of consumer goods may be flat, and nominal income may be increasing, but workers increasingly can’t afford housing.
Also, as someone that refinanced a house this year, I can assure you the wealthy are receiving much larger payments than the working class got from their stimulus checks.
>You’re not taking asset inflation into account.
Yes, I am. All econometrics comparisons are in real (i.e., inflation adjusted) dollars.
Here's [1] one example: median inflation adjusted household income from 1985 ($52K) to today ($68K) has grown a lot. Dig up the same info per quintile, and you see the same trends.
This also ignores that households have fewer not more dual income over this time (check Census data to confirm if you don't belive), and that the average worker has gotten younger (thus are earlier in a career, thus lower income on the career ladder - this can be checked with BLS and Census data), and the actual person in the precise same set of circumstances now as then has shown even more growth than this simple median metric shows.
>workers increasingly can’t afford housing
Also false. Here [1] presents inflation adjusted price per square foot of new housing - remarkably consistent over the period listed 1978-2020. What has changed over this time is the median house has increased in size tremendously.
I've ran these numbers back as far as I can find data, and the trend is the same - flat per square foot price when inflation adjusted.
So I agree some places are expensive, but the vast majority of the US is not, and overall workers are not facing increased housing costs for the same housing. What they do now is want more than their predecessors want, and complain the prices are more.
>Also, as someone that refinanced a house this year, I can assure you the wealthy are receiving much larger payments than the working class got from their stimulus checks.
I also refinanced, and I don't how you conclude this from doing one refi, or even how you can conclude such a claim from a single anecdote. Care to explain?
If you;re going to claim some statement testable with real values, please provide a citation to your data. I don't find any of the stuff you're claiming to match these sources (Fed, Census, BLS, CBO) which are pretty well regarded sources of economic data.
[1] https://fred.stlouisfed.org/series/MEHOINUSA672N
[2] https://www.supermoney.com/inflation-adjusted-home-prices/
Yes, I am. All econometrics comparisons are in real (i.e., inflation adjusted) dollars.
Here's [1] one example: median inflation adjusted household income from 1985 ($52K) to today ($68K) has grown a lot. Dig up the same info per quintile, and you see the same trends.
This also ignores that households have fewer not more dual income over this time (check Census data to confirm if you don't belive), and that the average worker has gotten younger (thus are earlier in a career, thus lower income on the career ladder - this can be checked with BLS and Census data), and the actual person in the precise same set of circumstances now as then has shown even more growth than this simple median metric shows.
>workers increasingly can’t afford housing
Also false. Here [1] presents inflation adjusted price per square foot of new housing - remarkably consistent over the period listed 1978-2020. What has changed over this time is the median house has increased in size tremendously.
I've ran these numbers back as far as I can find data, and the trend is the same - flat per square foot price when inflation adjusted.
So I agree some places are expensive, but the vast majority of the US is not, and overall workers are not facing increased housing costs for the same housing. What they do now is want more than their predecessors want, and complain the prices are more.
>Also, as someone that refinanced a house this year, I can assure you the wealthy are receiving much larger payments than the working class got from their stimulus checks.
I also refinanced, and I don't how you conclude this from doing one refi, or even how you can conclude such a claim from a single anecdote. Care to explain?
If you;re going to claim some statement testable with real values, please provide a citation to your data. I don't find any of the stuff you're claiming to match these sources (Fed, Census, BLS, CBO) which are pretty well regarded sources of economic data.
[1] https://fred.stlouisfed.org/series/MEHOINUSA672N
[2] https://www.supermoney.com/inflation-adjusted-home-prices/
Absolutely agree. The main takeaway was an accelerated stratification. The big got bigger, small companies shrank (went niche), and the (major) middle collapsed. That doesn’t bode well for the average employee.
There's some odd things about what you might have thought would have been a straight economic dump (and which might still be);
a) House prices in the UK have gone up a lot - because being forced to work from home people want to work from somewhere nice, and they may as well get out of the city - I didn't expect a big house price rise!
b) Plenty of low paid sectors are busy; things like those food delivery etc are all busy and the people working for them are - but then again the pubs/resteraunts are doomed.
c) There's a lot of pent-up demand for when it's safe; people who want repair work done just as soon as you're prepared to let workmen into your house, holidays to be taken, special meals to be had at restaurants
I'm assuming (b) & (c) will soften the outcome when the governments stop pumping money into the economy.
I'm assuming (b) & (c) will soften the outcome when the governments stop pumping money into the economy.
> By July I realized a couple things (and adjusted my investments accordingly)
You're definitely making valid points, but this sounds like a whole lot of hindsight bias: you're rationalizing something that was rather unpredictable (the full impact of the pandemic on the economy, and whether that would surpass the market's expectations or not).
How did you possibly adjust your investment strategy based on these "learnings"? It sounds like this can only lead to the same forms of losses you've had with your initial risky investment (overly confident that pandemic = stock market crashing).
You're definitely making valid points, but this sounds like a whole lot of hindsight bias: you're rationalizing something that was rather unpredictable (the full impact of the pandemic on the economy, and whether that would surpass the market's expectations or not).
How did you possibly adjust your investment strategy based on these "learnings"? It sounds like this can only lead to the same forms of losses you've had with your initial risky investment (overly confident that pandemic = stock market crashing).
Basically, completely reversing course:
1) Focusing on the winners (FAANG and those that sell shovels to the gold miners)
2) Momentum driven companies where tons of liquidity is flowing to (TSLA etc)
1) Focusing on the winners (FAANG and those that sell shovels to the gold miners)
2) Momentum driven companies where tons of liquidity is flowing to (TSLA etc)
You're chasing the money after it's already gone to those stocks.
Piling onto an investment trend late is the classic retail investor mistake - because most of the upward movement already happened and that leaves limited upside and large downside potential.
I don't recommend that as an investment strategy. It would be safer and likely better to just buy the index instead.
If you want to make money actively investing you really need an insight that most other investors don't yet have.
In a bull market you can make money picking stocks with darts, but that doesn't make it a good strategy.
Piling onto an investment trend late is the classic retail investor mistake - because most of the upward movement already happened and that leaves limited upside and large downside potential.
I don't recommend that as an investment strategy. It would be safer and likely better to just buy the index instead.
If you want to make money actively investing you really need an insight that most other investors don't yet have.
In a bull market you can make money picking stocks with darts, but that doesn't make it a good strategy.
You should not be actively investing.
To be clear to the three instant downvoters, I'm saying parent is deluded and is going to lose repeatedly, not that active investing is a losing proposition in general:
> 2) Momentum driven companies where tons of liquidity is flowing to (TSLA etc)
Put the money in the money thing! Yea! Parent is the portrait of sad hype-driven retail investor.
To be clear to the three instant downvoters, I'm saying parent is deluded and is going to lose repeatedly, not that active investing is a losing proposition in general:
> 2) Momentum driven companies where tons of liquidity is flowing to (TSLA etc)
Put the money in the money thing! Yea! Parent is the portrait of sad hype-driven retail investor.
Correct me if I'm wrong, but isn't momentum a well-known and fairly tried-and-tested strategy, and hasn't it greatly outperformed value over the past decade or two? Doesn't mean it will keep working forever, of course.
Momentum trading is a specific TA approach which I seriously doubt parent knows about. It doesn't sound like identifying "Momentum driven companies" (wut) but specific technical signals. More likely they have $1000 in RobinHood and their "big loss" was $200, so this entire thread is pointless.
OP here: My options trading account is well into 7 figures, and I do a tremendous amount of selling premium and wheel strategies on quite a few stocks, in addition to momentum trading.
Careful on the investment lectures.
Careful on the investment lectures.
Have you made that money in bad times as well as good though? Plenty of people posting gain porn for 2020, but they may not be the next Warren Buffett....
> Correct me if I'm wrong, but isn't momentum a well-known and fairly tried-and-tested strategy, and hasn't it greatly outperformed value over the past decade or two?
If that was true everyone would be doing it, and then the advantage would go away.
In short: if you think there's a "tried-and-tested strategy" that outperforms over anything but the short-term, then you either reject the efficient markets hypothesis--which would be pretty remarkable--or you don't understand it.
If that was true everyone would be doing it, and then the advantage would go away.
In short: if you think there's a "tried-and-tested strategy" that outperforms over anything but the short-term, then you either reject the efficient markets hypothesis--which would be pretty remarkable--or you don't understand it.
> You should not be actively investing.
Someone is.
Someone is.
Active investing is a full time job that people who do it full time often fail it. You often need multi millions in the bank for it to start outperforming your actual job income too, so it doesn't make sense outside of investment firms and banks most of the time.
Realize that part of active investing is you have to beat the returns of VTI + your current job / biz income.
Realize that part of active investing is you have to beat the returns of VTI + your current job / biz income.
“Be fearful when others are greedy, and greedy when others are fearful” - Warren Buffett
You seem to be doing the opposite.
You seem to be doing the opposite.
someone could have used that logic to avoid TSLA when it was at $50 Not that he is wrong, but heeding aphorisms is not that useful in terms of making money.
Yup, exactly. There is such thing as momentum trading.
Most of my positions were already closed out last month. So all the above thesis’ that said I was doing the wrong thing were.... wrong.
I also have significant positions that are DCA boring stuff, angel investments, real estate, all across the board. As well as I do a lot of selling premium in the options markets (theta gang).
It’s funny how folks are quick to lecture... :)
Most of my positions were already closed out last month. So all the above thesis’ that said I was doing the wrong thing were.... wrong.
I also have significant positions that are DCA boring stuff, angel investments, real estate, all across the board. As well as I do a lot of selling premium in the options markets (theta gang).
It’s funny how folks are quick to lecture... :)
You are right but now when everybody and his 2nd cousin are into stock market we are getting more and more signals of cyclical market top...
Price discovery always fixes this problem.
The problem is how long price discovery takes is never known.
But one is certain, the market can stay irrational longer than you can stay solvent trying to await that price discovery to finally happen.
The problem is how long price discovery takes is never known.
But one is certain, the market can stay irrational longer than you can stay solvent trying to await that price discovery to finally happen.
Price and value have almost no correlation though. As future cashflows dwindle in number, the cost to buy a chunk of those future cashflows go up, and the people who have the most free money to buy that stuff are the ones getting free cash from the Fed.
Not to make the connection, I don't think we're at any risk of hyper inflation, but the Caracas stock exchange went up 200,000 percent in 2018. Had nothing to do with value creation.
Not to make the connection, I don't think we're at any risk of hyper inflation, but the Caracas stock exchange went up 200,000 percent in 2018. Had nothing to do with value creation.
Agreed in general on the printing of free money, but there is a phase-lag.
The big difference in Caracas is that the price of a cheeseburger may have risen by the same amount when priced in the same currency. That isn't nearly as much the case in the US of 2020.
The big difference in Caracas is that the price of a cheeseburger may have risen by the same amount when priced in the same currency. That isn't nearly as much the case in the US of 2020.
Why heartbreakng?
Because millions of people are sliding into poverty through no fault of their own, and the effects of this pandemic will continue to reverberate for them for decades to come even though the vast majority of people who visit this website will have suffered few or no effects.
Yes. In other crisis you could argue that people over extended themselves or for greedy. Here a lot of small business are going to get wiped off through no fault of their own. Politicians have not helped
Don’t bothsides this. Only one person decided that millions of Americans should have their unemployment insurance expire today.
While that might be it's irrelevant to the point that politicians have, in general, not helped.
Agreed, and yet looking at the Biden transition team the wealth transfer is going into hyperdrive. I can’t see the Dems winning progressives again with the “other guy is real bad” argument, so let’s hope the next Trump isn’t even worse.
>Agreed, and yet looking at the Biden transition team the wealth transfer is going into hyperdrive.
elaborate?
elaborate?
As long as we're engaged in extremely reductive reads of the political situation, Trump and the Senate GOP were ready to agree to $1,200 checks and UI extension before the election, but Nancy Pelosi used the pretext of being opposed to employer immunity from Covid lawsuits (which they have since caved on) to block the legislation.
This is a really cynical read.
If you want you can replace the word "pretext" with "reasoning," the rest of it is a matter of fact and public record. Although I'm not sure how one justifies any kind of read other than a "cynical" one after this year.
You sound like you missed the part where Trump/GOP waited until before the election to be ok with literally buying votes
Number 3 is highly unethical, and outweighs all the benefits IMO. Wealth inequality was already sky high. After this, it won’t be even possible to see those with nothing in the rear view mirrors.
(To be clear, the wealth transfer is from those who already had very little (too little to invest) to those who already owned massive amount of stocks and real estate.)
(To be clear, the wealth transfer is from those who already had very little (too little to invest) to those who already owned massive amount of stocks and real estate.)
> from stagnant businesses holding on to dear life to the quick and nimble
It's not "the quick and the nimble," it's the connected and the too-big-to-fail. Our local Mexican restaurant which used to host salsa dancing every Friday and Saturday was doing a thriving business until they were ordered to close for indoor dining. Meanwhile Target, Home Depot, and the Amazon warehouses are allowed to remain open (essentials, donchaknow), and other giant corporations which might otherwise have been in trouble, like the airlines, will be allowed to borrow whatever they need at 0% interest rates to last until the lockdowns are lifted.
It's not "the quick and the nimble," it's the connected and the too-big-to-fail. Our local Mexican restaurant which used to host salsa dancing every Friday and Saturday was doing a thriving business until they were ordered to close for indoor dining. Meanwhile Target, Home Depot, and the Amazon warehouses are allowed to remain open (essentials, donchaknow), and other giant corporations which might otherwise have been in trouble, like the airlines, will be allowed to borrow whatever they need at 0% interest rates to last until the lockdowns are lifted.
> Unprecedented liquidity of the money supply is giving any individual or business access to $$ to invest, spend, etc. It's unequal, but it's there and it's driving the economy right now.
It is not driving the economy. That's the problem that is being addressed by the continuing printing of money to issue bonds. The banks have every incentive to lend, but they don't. Why? You can see that the banks have a rather simple calculation.
Make money via:
* Lend small amounts to people at a relatively low rate who have an unqualified risk value due to covid and justify the administration of that loan that might get written off at 50% value. Profit, hopefully.
* Buy some sub 1% bonds. Profit a little.
* Buy equities (like mortgages) that are the most reliable (of the other unreliable lending) payoffs. Profit...until people start losing their housing and properties all at once. The govt helps indemnify against this a bit, but in the end of the day you get your inflated property if the little people can't tough it out.
* Buy stocks (like their own) because of the massive debt bubble inflating tech and financial stock portfolios that grow as the massive bond purchases prop it up (every company tries to diversify by buying a couple million here and there). Profit.
* others that are not lending related...
> (3) We're witnessing one of the greatest wealth transfers in the history of our country,
Yes, for the reasons listed. Small banks are doomed. Even credit unions are combining.
> 4) ...resulting in massive dislocation of where dollars flow to residential and commercial real estate.
I'm not sure why you were so vague. Residential real estate has been inflated and commercial real estate has cratered.
These trends will continue as long as there are covid fears and lockdowns. The economy is already so damaged, it will not recover in our lifetime and will likely result in an alternative currency...that is also strictly controlled by the central banks, of course.
YMMV
It is not driving the economy. That's the problem that is being addressed by the continuing printing of money to issue bonds. The banks have every incentive to lend, but they don't. Why? You can see that the banks have a rather simple calculation.
Make money via:
* Lend small amounts to people at a relatively low rate who have an unqualified risk value due to covid and justify the administration of that loan that might get written off at 50% value. Profit, hopefully.
* Buy some sub 1% bonds. Profit a little.
* Buy equities (like mortgages) that are the most reliable (of the other unreliable lending) payoffs. Profit...until people start losing their housing and properties all at once. The govt helps indemnify against this a bit, but in the end of the day you get your inflated property if the little people can't tough it out.
* Buy stocks (like their own) because of the massive debt bubble inflating tech and financial stock portfolios that grow as the massive bond purchases prop it up (every company tries to diversify by buying a couple million here and there). Profit.
* others that are not lending related...
> (3) We're witnessing one of the greatest wealth transfers in the history of our country,
Yes, for the reasons listed. Small banks are doomed. Even credit unions are combining.
> 4) ...resulting in massive dislocation of where dollars flow to residential and commercial real estate.
I'm not sure why you were so vague. Residential real estate has been inflated and commercial real estate has cratered.
These trends will continue as long as there are covid fears and lockdowns. The economy is already so damaged, it will not recover in our lifetime and will likely result in an alternative currency...that is also strictly controlled by the central banks, of course.
YMMV
I wish I had some data on what big banks are doing with the very cheap money they can borrow. Anyone know any sources?
I don't think banks are borrowing any money (reserves). Banks borrow reserves from other banks or the central bank when they are lending and they have not enough reserves.
In the current situation the central banks has been buying assets from the banks in order to increase the reserves available, so banks have a lot of reserves and don't need to borrow. In fact, I don't think they know what to do with so much liquidity because there are not enough demand of credit in the economy.
In the current situation the central banks has been buying assets from the banks in order to increase the reserves available, so banks have a lot of reserves and don't need to borrow. In fact, I don't think they know what to do with so much liquidity because there are not enough demand of credit in the economy.
> The economy is already so damaged, it will not recover in our lifetime and will likely result in an alternative currency...that is also strictly controlled by the central banks, of course.
Institutional players are increasingly warming to Bitcoin and it seems like that’s where things are headed imo.
Institutional players are increasingly warming to Bitcoin and it seems like that’s where things are headed imo.
I've been reading Lords of Finance, which covers the early 1900s. It's eerie how the current situation reflects the pre Black Thursday boom. Investments started to concentrate into a few stocks (then RCA and Montgomery Ward) as retail investors piled in. Folks were buying on margin, credit was easy. The difference now I think is the willingness of the Fed to reduce interest rates to support the stock market as well as a too big too fail ethos. At the time, the Fed wanted to drive out speculators which exacerbated things. I wonder how long the Fed will keep it up.
Everyone invert this. Poor OP's going to get slaughtered again.
I would agree. Delivery services aside from Amazon weren't doing great before the pandemic and it's not clear it's a great business to be in at anytime.
that is what people said in 2011-2013 after the S&P 500 had already doubled off the lows of the crisis, expecting the market to fall after what had been such a big rally. Instead the market would proceed to double again.
Nah, those trades are already settled and cleared :)
Would you share any favorite sources for your bullet points? Thank you.
Where is the evidence of this wealth transfer? That just seems like the same old mistake of thinking that wealth is zero-sum.
Isn’t most of this stock market gain from new wealth that is being created? Much of it goes to people wealthy enough to own stocks, but if it’s new wealth that’s not a wealth transfer, plus not all of it does. Companies with higher stock prices will tend to hire more, reinvest into growing the business which requires more employees. Amazon has been on a hiring tear all year, for example.
Then there was also the whole CARES act this year, and the follow-up package that should be passed any day now. Which offered an unprecedented level of unemployment insurance for laid off workers and actually reduced the poverty rate in the country over this summer to lower than pre-pandemic levels.
Isn’t most of this stock market gain from new wealth that is being created? Much of it goes to people wealthy enough to own stocks, but if it’s new wealth that’s not a wealth transfer, plus not all of it does. Companies with higher stock prices will tend to hire more, reinvest into growing the business which requires more employees. Amazon has been on a hiring tear all year, for example.
Then there was also the whole CARES act this year, and the follow-up package that should be passed any day now. Which offered an unprecedented level of unemployment insurance for laid off workers and actually reduced the poverty rate in the country over this summer to lower than pre-pandemic levels.
Wealth is not zero-sum, but when you artficially create liquidity it steals value from the labour class - note how the price of the mcchicken, which at $1.00 was a staple for laborers, went to $1.37.
The labor class is not generally directly seeing the fruits of this liquidity. Even when progressives channel these funds to say low income housing, it's still trickle-down, much of it winds up in the pockets of, e.g. construction firm contracted to build it, politically connected solar panel company because these projects must fulfill green bona fides, etc.
The labor class is not generally directly seeing the fruits of this liquidity. Even when progressives channel these funds to say low income housing, it's still trickle-down, much of it winds up in the pockets of, e.g. construction firm contracted to build it, politically connected solar panel company because these projects must fulfill green bona fides, etc.
Also, at least in the US, around 50% of the population (last time i checked) does not own stocks.
yep. if we had a stock market crash with no bailout it might actually level the inequality.
correction: McChicken is now $1.29, not $1.37
Accounting for inflation, there is a wealth transfer. As the rich get richer, supply-constrained assets like housing become more expensive. Folks whose income doesn't scale similarly lose purchasing power, and their quality of life drops as a higher portion of their income goes to rents.
Maybe you’re right, I’m generally wondering if there is a wealth transfer, but so far it seems much more complicated than any simple analysis or example I’ve seen.
The example you chose is a particularly bad one though because rents are down a lot this year in high cost of living areas.
Also, just in general there’s no reason housing should be a “supply constrained resource” by definition like you seem to be taking as a basic fact. Take a look at Tokyo for example.
The example you chose is a particularly bad one though because rents are down a lot this year in high cost of living areas.
Also, just in general there’s no reason housing should be a “supply constrained resource” by definition like you seem to be taking as a basic fact. Take a look at Tokyo for example.
More people will stop paying rent.
Homeowners will not be able to evict them during / post Covid ( especially in the Bay Area ).
I think we’ll see squatting in a home until it becomes yours more common as well.
Homeowners will not be able to evict them during / post Covid ( especially in the Bay Area ).
I think we’ll see squatting in a home until it becomes yours more common as well.
The reason large cap stocks are going up the way they are is because their small- and medium-sized competition is being systematically suffocated by lockdowns and doesn't have the same access to publicly subsidized credit to wait out the storm. The DoorDash and Amazonification of the economy is not some organic development, it is being directly fueled by the pandemic response.
The CARES Act was a joke for everyone except the large corporations to which it made $5 trillion available. A single $600 check and some meager UI for everyone else, and for small businesses, coverage for a measly 10 weeks of payroll.
The CARES Act was a joke for everyone except the large corporations to which it made $5 trillion available. A single $600 check and some meager UI for everyone else, and for small businesses, coverage for a measly 10 weeks of payroll.
One COVID related transfer of wealth involves the Paycheck Protection Program. I know of several local profitable small businesses that received loans through this program. They were never in a position to layoff workers. When those loans are forgiven, as most are, or will be, where does that money go? Right in to the owner's pocket. It's interesting how many law firms qualified...
Stockholders did great but folks working ordinary jobs not so much. Lots of people got laid off or had to work in dire conditions.
This Cares act also appropriated most of the money for corporate welfare and only a small portion for ordnirary people.
This Cares act also appropriated most of the money for corporate welfare and only a small portion for ordnirary people.
> That just seems like the same old mistake of thinking that wealth is zero-sum.
The mistake is actually thinking that wealth is never zero-sum. Although the myth is so pervasive among HN circles, it's almost like an old wive's tale and extremely hard to combat at this point. It's also just a very incorrect generalization.
Anyone who's had more than a rudimentary brush with economics should have no trouble understanding why that is.
To give a few reasons why that statement is usually either outright false or a gross oversimplification to the point of being useless:
1. Whether something is zero-sum or not depends on the period of time you're looking at. Always. When you say something is or isn't zero-sum, you need to specify what time period you're referring to. Good place to start is here.
https://www.economicshelp.org/blog/glossary/short-run-long-r...
In this particular case, I'd consider the COVID-19 lockdowns to still be short-run. And it isn't particularly evident if the wealth during this time has increased, is zero-sum or negative-sum
2. Many things that traditionally generate or store wealth for the people are indeed zero-sum. Desirable land within a certain zip-code, for example. Or in an area with high economic activity, e.g. downtown of a city. These things are both explicitly zero-sum (although it doesn't directly transfer 1:1 as wealth). Their valuation may grow in the long-run, which, if sold, and transferred to other economic activities by their owners, would make the wealth a net gain.
3. Market Cap/Valuation is not wealth. When sellers/buyers are large enough, the price of a stock does not directly transform into the same amount of wealth. You can't take AMZN and sell off all of its stock at its current price.
4. Pertaining to the current situation, it isn't really clear if companies that are hiring more and generating more wealth right now is compensating for the country-wide loss of jobs from the pandemic. Not even economists can predict with good accuracy whether this is going to result in a net wealth gain when all is said and done. However, this is evidence of a wealth transfer, because the surplus labor generated by extra AMZN workers goes directly to its largest shareholders, e.g. Bezos.
(Note, that you can have a positive-sum wealth generation and a wealth transfer at the same time)
> Then there was also the whole CARES act this year
5. Printing money does not generate wealth.
The mistake is actually thinking that wealth is never zero-sum. Although the myth is so pervasive among HN circles, it's almost like an old wive's tale and extremely hard to combat at this point. It's also just a very incorrect generalization.
Anyone who's had more than a rudimentary brush with economics should have no trouble understanding why that is.
To give a few reasons why that statement is usually either outright false or a gross oversimplification to the point of being useless:
1. Whether something is zero-sum or not depends on the period of time you're looking at. Always. When you say something is or isn't zero-sum, you need to specify what time period you're referring to. Good place to start is here.
https://www.economicshelp.org/blog/glossary/short-run-long-r...
In this particular case, I'd consider the COVID-19 lockdowns to still be short-run. And it isn't particularly evident if the wealth during this time has increased, is zero-sum or negative-sum
2. Many things that traditionally generate or store wealth for the people are indeed zero-sum. Desirable land within a certain zip-code, for example. Or in an area with high economic activity, e.g. downtown of a city. These things are both explicitly zero-sum (although it doesn't directly transfer 1:1 as wealth). Their valuation may grow in the long-run, which, if sold, and transferred to other economic activities by their owners, would make the wealth a net gain.
3. Market Cap/Valuation is not wealth. When sellers/buyers are large enough, the price of a stock does not directly transform into the same amount of wealth. You can't take AMZN and sell off all of its stock at its current price.
4. Pertaining to the current situation, it isn't really clear if companies that are hiring more and generating more wealth right now is compensating for the country-wide loss of jobs from the pandemic. Not even economists can predict with good accuracy whether this is going to result in a net wealth gain when all is said and done. However, this is evidence of a wealth transfer, because the surplus labor generated by extra AMZN workers goes directly to its largest shareholders, e.g. Bezos.
(Note, that you can have a positive-sum wealth generation and a wealth transfer at the same time)
> Then there was also the whole CARES act this year
5. Printing money does not generate wealth.
Are you confident you can find the next downtown?
It is not that the economy collapsed due to Covid, as many wrongly predicted would happen, but rather it got shifted and re-organized to a more efficient state dominated by online firms, big retail, food delivery, etc. The pandemic had the effect of accelerating the US economy to a more efficient state. This is why you should generally be skeptical of media narrative of crisis. yes, in 2007-2008 the media was wright about a housing crisis, but they tend ot get it wrong more often than not. Even when there is crisis ,it tends to be short lived and many underestimate the v-shaped nature of recoveries. If you sell your stocks, waiting a few months may mean having to buy back at a higher price even if the crisis has not subsided. Covid is gonna be with us for years and many jobs and businesses will never returns, yet the market made new highs by July 2020.
Interest rates are near zero and people think the Fed will bail them out if things go south again. That’s why the market is high.
If large companies were not making record profits, the market would not be this high no matter what the interest rates the Fed chose to set.
Yes, stocks are the only investment that has a decent return right now -- but don't let that obscure the real changes to the economy that are happening. Large companies and e-commerce companies are doing fantastically well this year. (So are their employees, for the most part.)
Yes, stocks are the only investment that has a decent return right now -- but don't let that obscure the real changes to the economy that are happening. Large companies and e-commerce companies are doing fantastically well this year. (So are their employees, for the most part.)
[deleted]
no, that is not the main reason. the reason is strong corporate profits and earnings. FAANG stocks generating record profits and earnings, Same for retail and companies like Disney and Walmart.
[deleted]
My philosophy is you don't know what crazy shit the govt and rich will do in response to socio-financial disasters like the 2007 housing crisis or covid 19, so it's very risky to make bets on systemic things like that.
My immediate reaction was (1) virus fears were overblown and (2) inflation. I was clearly wrong about the virus but the latter may come to haunt central banks. People should be investing in real assets such as commercial real estate at distressed levels and in particular privately held luxury hotel properties.
You were not wrong. The initial estimates in jan-feb was an infection fatality rate in the 1-5% range, which is pretty bad and comparable to something like prostate cancer or lymphoma, yet by March/April, when the stock market bottomed, a bunch of studies such as study of asymptomatic prison cases and a study of California cases, showed a much, much lower IFR, of around .2-.5%, which has fallen ever since as more people are tested, which came as major phycological relief even as the death and case count costumes to rise.
The estimates back then were 0.5%, but many media outlets were conflating them with case fatality rates, which were the percentage of hospitalized people that died (and are well above 1%)
I feel like every 2nd man on planet earth bought TSLA at this point.
When they did a 5to1 split, the price just doubled, giving birth to around 250bn$, just like that. Seemingly without anything significant happening around Tesla.
I cant help but think that people only want more, and the amount of people who feel the same way are reached another peak. The last time splitting has this big of an effect on the price, was in the dot com bubble.
I hope I'm wrong.
> I feel like every 2nd man on planet earth bought TSLA at this point.
Now that it's been added to SPY you might not be wrong, it's very possible more than half of investors own shares in TSLA one way or another.
Now that it's been added to SPY you might not be wrong, it's very possible more than half of investors own shares in TSLA one way or another.
I wonder if there's a market for a financial product that looked at your ETF holdings and allowed you to cancel out a particular instrument. I don't have the appetite to be net short, but there are stocks I'd like to negate my ownership of.
Thanks to automation, fractional shares and zero commissions, "direct indexing" is a thing now. You can track an index of your own design instead of trying to cancel out positions.
Interesting, thanks for the pointer to that phrase, I'm reading up on it now.
Are there products that make it easy to do this? I imagine it would be theoretically possible but incredibly time-consuming to keep up with SPY by manually trading on RobinHood!
Are there products that make it easy to do this? I imagine it would be theoretically possible but incredibly time-consuming to keep up with SPY by manually trading on RobinHood!
I believe the products that make it easy are currently only available through financial advisors, and for high net worth clients. But the demand seems to be there, so something accessible to the average retail investor may appear in the next few years.
This is a really intriguing idea! You would of course run into the issue that that product would appear to have horrible returns right up until the rug gets pulled out, and liquidity might be an issue (margin for the short would have to be provided and presumably could not be directly provided by the long positions). But at the very least one could theoretically write something which could take in a portfolio of ETF positions and output "short this much ABC and XYZ to be net flat in those stocks."
Let me check my historical correlation between massive margin borrowing and subsequent stock market prices ...
I feel like I understand a bit about the current monetary policy (US and some of the world) vs the debt market.
I was puzzled by the Fed's interest rate 0 until 2023 - until I realized that the LIBOR to SOFR transition had been pushed, in part, to 2023 (https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W). Chances that it finishes out in 2023 is slim, but it's something.
Stocks are not a replacement for bonds...and bonds with <1% (https://www.treasury.gov/resource-center/data-chart-center/i...) aren't even a good investment anymore, pushing this stock bubble higher. The people tripling down on long-term trades like Tesla for retirement are idiots banking on the good times going on for decades. Remember 2000s when there was a media push for "Generation Equity" - WIRED frontpage? Yeah, that was the same thinking. There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear).
If you want to do short selling or short-term trading, that's great, but these are these infantile investors that are going to see their investments wiped out in a correction.
I was puzzled by the Fed's interest rate 0 until 2023 - until I realized that the LIBOR to SOFR transition had been pushed, in part, to 2023 (https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W). Chances that it finishes out in 2023 is slim, but it's something.
Stocks are not a replacement for bonds...and bonds with <1% (https://www.treasury.gov/resource-center/data-chart-center/i...) aren't even a good investment anymore, pushing this stock bubble higher. The people tripling down on long-term trades like Tesla for retirement are idiots banking on the good times going on for decades. Remember 2000s when there was a media push for "Generation Equity" - WIRED frontpage? Yeah, that was the same thinking. There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear).
If you want to do short selling or short-term trading, that's great, but these are these infantile investors that are going to see their investments wiped out in a correction.
> There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear).
Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).
Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).
Inflation has already taken hold in some areas of the markets, eg commodities and consumer goods (https://fred.stlouisfed.org/series/CPIAUCSL). That's why the world govt/banks (as if the govt's understand much of this) have enacted deflationary forces of 0% interest rates and bonds of sub 1% and it will fall until the bond market drops out and starts the cascade of defaults. That just manages to slow the current debt bubble and until the debt defaults start, inflation doesn't shrink it. The equity prices have never changed into an increase in consumer liquidity (people are still getting paid the same) while the purchasing power of the dollar has been halved since 2010. Eventually the equities will default or mature (depending on structure) and who has the cash to cover that? Institutions will continue to become insolvent as they are unable to collect on debt, to pay back debt. It's possible (like in Venezuela) the biggest and baddest will survive to remove a couple zeros and declare "the big reset" making it all reasonable again.
Now I'm confused. 0% interest rates should be inflationary, not deflationary, no? "Inflation doesn't shrink debt?" Surely it does. Equities will default or mature - erm, equities don't do either? To convince the reader you really know what's going on, it would help to be precise with your language.
> "Inflation doesn't shrink debt?" Surely it does.
I don't see it that way, because it isn't working that way. The reduced interest rate has not resulted in additional lending, but in additional asset acquisition, mostly more debt (deflationary). This is mostly due to nobody borrowing and the uncertainty leading to people using money to pay down debts, (deflationary). Inflation can makes debt more manageable, but that's if you can get ahold of the liquidity. The liquidity doesn't exist and the printing of money via bonds, doesnt make the problem better because the dollars you get from the fed are at the price of more debt. The presence of inflation today doesn't equal reduced debt today.
> Equities will default or mature
The vast majority of the market overvaluation is in companies with massive leverage (investment in a type of financial debt - either bonds and mortgages) or are banks that have nothing but that to carry their share price. The modern equity prices are basically tied to the load of debt they have acquired.
If you don't see things this way, that's fine. That's what it all looks like to me.
I don't see it that way, because it isn't working that way. The reduced interest rate has not resulted in additional lending, but in additional asset acquisition, mostly more debt (deflationary). This is mostly due to nobody borrowing and the uncertainty leading to people using money to pay down debts, (deflationary). Inflation can makes debt more manageable, but that's if you can get ahold of the liquidity. The liquidity doesn't exist and the printing of money via bonds, doesnt make the problem better because the dollars you get from the fed are at the price of more debt. The presence of inflation today doesn't equal reduced debt today.
> Equities will default or mature
The vast majority of the market overvaluation is in companies with massive leverage (investment in a type of financial debt - either bonds and mortgages) or are banks that have nothing but that to carry their share price. The modern equity prices are basically tied to the load of debt they have acquired.
If you don't see things this way, that's fine. That's what it all looks like to me.
[deleted]
I think it is important to grok that what people today consider 'investing' is what most not that many years ago considered 'highly speculative trading.'
I found an article on the topic [0] quite interesting. Taking its mapping of ratio to future returns and using the latest data [1], we should expect ~2% return over the next 10 years.
[0]: http://www.philosophicaleconomics.com/2013/12/the-single-gre...
[1]: https://fred.stlouisfed.org/graph/?g=qis
[0]: http://www.philosophicaleconomics.com/2013/12/the-single-gre...
[1]: https://fred.stlouisfed.org/graph/?g=qis
No, you see, This Time Is Different.
I agree, but where are the cracks this time?
Look for the industries laying people off. These are the industries facing new or ongoing stress. https://www.bls.gov/web/empsit/cpseea31.htm for November. See the unemployment rate for apples to apples stats.
Should these firms survive, their labor costs may be depressed for a few years unless they were already paying their median worker at minimum wage (energy wasn't). Firms use labor in the short run to adjust for income gaps/overages. They tend to adjust capital in the long run, which is why hotels aren't yet all selling their properties.
Should these firms survive, their labor costs may be depressed for a few years unless they were already paying their median worker at minimum wage (energy wasn't). Firms use labor in the short run to adjust for income gaps/overages. They tend to adjust capital in the long run, which is why hotels aren't yet all selling their properties.
My overwhelming impression from articles and discussions like this is that almost nobody really understands what's happening. It's mostly superficial correlations and gut reactions. This is not surprising because the economy and capital markets is a complex, chaotic, partially observed system. And revealing information and predictions about this system can affect it.
The actual headline should be: record low interest rates continue to fuel bubbles in stocks, bonds, real estate, and speculative assets like cryptocurrency.
Indeed. When there is no cost of money (to pretty much anyone) bad things are not far away.
Less talked about and also fueling the rise over a longer time horizon has been the great reduction in the number of listed companies. That is more of a driver on the fund/etf composition side than the mom and pop TSLA/AAPL day trader.
Less talked about and also fueling the rise over a longer time horizon has been the great reduction in the number of listed companies. That is more of a driver on the fund/etf composition side than the mom and pop TSLA/AAPL day trader.
We’re all getting rich. Only we aren’t.
Seems like a great depression-like downturn is imminent(?). Any advice on the best way to weather the storm? I'm not looking for huge gains or getting rich through it. I just want to make sure my money isn't worth 10X less and/or my family doesn't starve.
Depends on your risk tolerance and level of management.
The easiest option is to exit the stock market entirely. Just hold cash. Spread it across multiple banks and accounts.
Next easiest option is to change your stock/bond ratio. Make sure the bond ETF you use is diversified.
Next easiest option is to keep a static portfolio but put more than a stock ETF and a bond ETF in it. There's a nice set of "lazy" portfolios here [0].
Next easiest option is to build a static portfolio for a particular level of risk. There's a handy tool here [1] that can spit out the optimal balance given a goal and a set of assets to choose from (I'd choose a selection of ETFs). If you're risk-averse, your goal is probably to minimize variance.
Next easiest option is to switch to a dynamically-weighted portfolio that changes the balance of assets in your portfolio based on market conditions. This can be the same as the previous option but you'd recalculate the portfolio month-to-month.
And finally, there's playing with derivatives. You can "insure" whatever portfolio you like using options and/or futures.
I would strongly advise against anything "crypto". Either the financial system is still functioning and you'll benefit from regulated financial markets, or it isn't, and your cryptocoins will be useless, because they're difficult enough to use today, why would it be any easier when the world is crumbling?
And this all assumes the US financial system is still functional. If that's not the case, I'd focus less on finance and more on doomsday prepping.
[0]: https://www.bogleheads.org/wiki/Lazy_portfolios
[1]: https://www.portfoliovisualizer.com/optimize-portfolio
The easiest option is to exit the stock market entirely. Just hold cash. Spread it across multiple banks and accounts.
Next easiest option is to change your stock/bond ratio. Make sure the bond ETF you use is diversified.
Next easiest option is to keep a static portfolio but put more than a stock ETF and a bond ETF in it. There's a nice set of "lazy" portfolios here [0].
Next easiest option is to build a static portfolio for a particular level of risk. There's a handy tool here [1] that can spit out the optimal balance given a goal and a set of assets to choose from (I'd choose a selection of ETFs). If you're risk-averse, your goal is probably to minimize variance.
Next easiest option is to switch to a dynamically-weighted portfolio that changes the balance of assets in your portfolio based on market conditions. This can be the same as the previous option but you'd recalculate the portfolio month-to-month.
And finally, there's playing with derivatives. You can "insure" whatever portfolio you like using options and/or futures.
I would strongly advise against anything "crypto". Either the financial system is still functioning and you'll benefit from regulated financial markets, or it isn't, and your cryptocoins will be useless, because they're difficult enough to use today, why would it be any easier when the world is crumbling?
And this all assumes the US financial system is still functional. If that's not the case, I'd focus less on finance and more on doomsday prepping.
[0]: https://www.bogleheads.org/wiki/Lazy_portfolios
[1]: https://www.portfoliovisualizer.com/optimize-portfolio
Gold / silver / bitcoin / ethereum / real estate (non-commercial)
Anything desirable that can’t be created easily, as newly printed money will flow directly to it.
Anything desirable that can’t be created easily, as newly printed money will flow directly to it.
Buy some canned food and store it in the basement. I’m half joking, but I knew an old fellow in my grandmother’s village that almost starved during WW2, who developed a habit of storing non-perishable food, so that no matter how low the chance of that kind of event happening again, he never has too pass through that kind of ordeal again.
Unless you're planning on retiring soon, same thing as always: don't touch your stuff. The same mindset you have right now would've made you stop buying your monthly N stocks this March, and then you would've missed out on all the gains this year. Every month, invest some portion of your income in a low-fee broad market index fund and don't think about it. In a few short decades, chances are you'll come out fairly ahead.
When Tesla got hyped right into the S&P 500, index funds were forced to buy. The old advice of "just buy an index fund" may not be an eternal verity.
Assuming you think the public equity markets have the backing of the US federal government, why would you ever bet against an index fund?
I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).
I consider a broad market equity index fund to be a risk free asset on a 5+ year timeframe. State and local government defined benefit pension obligations are invested in them, individuals' 401k and IRA accounts are invested in them, and the most influential members of society are invested in them. There is no political will to let the price of stocks fall (or even stagnate), and so either the US government keeps stock prices chugging along, or the USD has lost its buying power, in which case you have a bigger problem than your stock market holdings (if you're American).
The S&P 500 about halved following the dot com bubble, and did the same thing again in 2007-8. That doesn’t seem to fit your thesis.
I wrote that you have to be able to wait 5 years.
Nb also this, which just came out:
https://www.nber.org/papers/w28253
That doesn’t work either. The S&P 500 was only just back to its 2000 level in 2008... and then crashed again.
True about times before 2008, I only entered the game that year. I guess my feelings are more based on the fact that I have only seen the Fed have a trigger finger anytime markets go down or stagnate, and so I assume their strategy is to prop them up. I also see the pension mess wreaking having on state and local governments, plus increasing baby boomer population retiring with 401k/IRAs, so there's lots of political will to keep markets going higher.
Yup, this is true. But that is not unlimited. I doubt if most central bankers would accept taking the health of major indices as a target. If some indices start to look very overvalued, or if pumping the markets starts to cause inflation more generally, then there will be a pressure to take the punch bowl away. Interesting times.
Serious question (I'm not an expert) - Why would there be an imminent depression-like downturn when effective vaccines were announced < 1 month ago?
I vaccines didn't exist, I would believe this but given they do, I can't image the future is not brighter.
I vaccines didn't exist, I would believe this but given they do, I can't image the future is not brighter.
People bored at home with excess cash from saved discretionary speding engage into online speculative investment. Ditto with cryptocurrencies.
The stock market is turning more and more into a casino. Investing is being gamified causing an addiction that is similar to what you see with gambling addicts. People just can't stop putting their money on risky bets in order get an adrenaline kick.
Brokers are also incentivized to sell risky products such as options as those are the ones that generate the highest revenues.
Brokers are also incentivized to sell risky products such as options as those are the ones that generate the highest revenues.
It was always a casino. It was also always rigged.
I think it has reached a whole new level
No trade is that far removed from gambling. There is always risk of some type. Trading at the professional level in virtually all underlying markets has become 'one way'. There are few, if any, market makers left. Everyone is now a prop trader, aka punter, though some will try to deny it saying they have 'models' or 'systems' and not just instinct.
Of course, many gamblers also have models and systems and it is not uncommon for professional traders to also be big casino/sports gamblers.
Less talked about is the ever shorter time horizon of what even still pass as investments. The shorter the holding period, the more likely the nature of the trade was more akin to a gamble than an investment.
To your other point, brokers don't "sell" options or other risky products to anyone anymore. The idea of someone calling you up on the phone and suggesting you buy 100 lots of OTM calls on TSLA is quaint at best. What brokers do do is make available products through their trading platforms that private 'investors' may trade after signing off on the appropriate paperwork (for instance, an options or futures agreement). Brokers are not going to check too hard to see if you lied about your knowledge of the prodcuts (and hence the 'suitability') as it is you, not them, who are going to make the trade/investment.
As to the financial aspect, brokers today have raced to the bottom with zero commisions on most products in exchange for selling order flow to other market participants. While it is certainly possible that in some cases the revenue from selling options trades is higher than equities, on the whole it is probably on a par. Robinhood averages $0.00026 per $1 of trade value for equities from Citadel. They average $0.50 per contract on the option side. So 1000 shares of a $50 stock gives $13 vs say 10 contracts giving $5. While 100 contracts might be more revenue, a 100 lot trade is probably a very cheap option with narrow(er) spread and not likely to get Robinhood $0.50/contract.
Of course, many gamblers also have models and systems and it is not uncommon for professional traders to also be big casino/sports gamblers.
Less talked about is the ever shorter time horizon of what even still pass as investments. The shorter the holding period, the more likely the nature of the trade was more akin to a gamble than an investment.
To your other point, brokers don't "sell" options or other risky products to anyone anymore. The idea of someone calling you up on the phone and suggesting you buy 100 lots of OTM calls on TSLA is quaint at best. What brokers do do is make available products through their trading platforms that private 'investors' may trade after signing off on the appropriate paperwork (for instance, an options or futures agreement). Brokers are not going to check too hard to see if you lied about your knowledge of the prodcuts (and hence the 'suitability') as it is you, not them, who are going to make the trade/investment.
As to the financial aspect, brokers today have raced to the bottom with zero commisions on most products in exchange for selling order flow to other market participants. While it is certainly possible that in some cases the revenue from selling options trades is higher than equities, on the whole it is probably on a par. Robinhood averages $0.00026 per $1 of trade value for equities from Citadel. They average $0.50 per contract on the option side. So 1000 shares of a $50 stock gives $13 vs say 10 contracts giving $5. While 100 contracts might be more revenue, a 100 lot trade is probably a very cheap option with narrow(er) spread and not likely to get Robinhood $0.50/contract.
[deleted]
Its always been like that, though admittedly Robin Hood has made the link even more transparent. I do not think that is the whole story or even the main story though. If you have a bit of savings today, there simply is no other place to put it in and if you just keep it in cash you are 100% guaranteed a negative return.
Negative return wrt inflation. Of course, you could buy TIPS and earn the inflation rate and perhaps some spread over, ie a 'real' return.
Holding a single options contract is no more or less risky than holding 100 shares of that same underlying stock... if you know what you are doing. The problem is, people don't know what they're doing and make oversized trades that get them into trouble.
was just about to say the same. casino "winners" are those who walk away after hitting a lucky streak.
An idea as old as the stock market itself. And yet, decades later, it is still the engine for raising capital.
(1978) The Gambling Fever On Stock Exchanges [1]
(1986) Capitalism's Casino [2]
(1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3]
(1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4]
(1995) Are Stock Markets Costly Casinos? [5]
(1999) The Wall Street Casino [6]
(2002) Nasdaq 'Casino' Had Few Safeguards [7]
(2011) Gambler or Investor? The Truth About Why We Trade [8]
(2014) The Big Casino [9]
(2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10]
(2020) When Did the Stock Market Become a Casino? [11]
---
[1] https://www.washingtonpost.com/archive/business/1978/09/07/t...
[2] https://www.washingtonpost.com/archive/business/1986/10/08/c...
[3] https://www.washingtonpost.com/archive/business/1989/12/31/t...
[4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s...
[5] https://core.ac.uk/download/pdf/80562055.pdf
[6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c...
[7] https://www.washingtonpost.com/archive/politics/2002/11/11/n...
[8] https://www.wsj.com/articles/SB10001424052702303499204576388...
[9] http://www.dollarsandsense.org/archives/2014/0514orr.html
[10] https://www.businessinsider.com/the-stock-market-is-a-danger...
[11] https://stocksandcoffee.com/stock-market-casino/
(1978) The Gambling Fever On Stock Exchanges [1]
(1986) Capitalism's Casino [2]
(1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3]
(1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4]
(1995) Are Stock Markets Costly Casinos? [5]
(1999) The Wall Street Casino [6]
(2002) Nasdaq 'Casino' Had Few Safeguards [7]
(2011) Gambler or Investor? The Truth About Why We Trade [8]
(2014) The Big Casino [9]
(2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10]
(2020) When Did the Stock Market Become a Casino? [11]
---
[1] https://www.washingtonpost.com/archive/business/1978/09/07/t...
[2] https://www.washingtonpost.com/archive/business/1986/10/08/c...
[3] https://www.washingtonpost.com/archive/business/1989/12/31/t...
[4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s...
[5] https://core.ac.uk/download/pdf/80562055.pdf
[6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c...
[7] https://www.washingtonpost.com/archive/politics/2002/11/11/n...
[8] https://www.wsj.com/articles/SB10001424052702303499204576388...
[9] http://www.dollarsandsense.org/archives/2014/0514orr.html
[10] https://www.businessinsider.com/the-stock-market-is-a-danger...
[11] https://stocksandcoffee.com/stock-market-casino/
Often when you see a ballooning of asset values--regardless if it's securities, real estate etc.--what it really winds up being is a ballooning of debt. Allowing retail investors to trade on margin is just asking for trouble. When you involve debt in trades even slight decreases in a asset values can completely clean you out. It may take another six months, but this probably won't end well.
Some companies did 600%+ in less than a year. Everyone wants a piece of that.
[deleted]
I take issue with dumb journalists who blatantly abuse the term "investors".
Its not rocket science.
If you use margin and/or engage in derivatives, you're not an investor, you're a speculator.
An investor is someone who has a long-term interest in the market and takes time to make reasoned decisions as to their actions in the markets.
If you're just jumping in and out of the market in the hope of making a quick buck here and there, you're not an investor, you're a speculator.
Its not rocket science.
If you use margin and/or engage in derivatives, you're not an investor, you're a speculator.
An investor is someone who has a long-term interest in the market and takes time to make reasoned decisions as to their actions in the markets.
If you're just jumping in and out of the market in the hope of making a quick buck here and there, you're not an investor, you're a speculator.
That's a little nitpick-y. Institutional investors, that make up the bulk of the market, allocate their investments based on a chosen strategy. So even index funds jump "in and out" of markets to balance their portfolios.
Stock trading is speculative by default--no one knows the future.
Stock trading is speculative by default--no one knows the future.
But how often do institutional investors sell all their holdings of a security in one go? Sure there is rebalancing but that is nothing compared to a RH trader that liquidates his entire position at the end of the day.
More often than you think. Entire funds go in and out of existence constantly.
I'm talking about solvent funds like ARK.
ARK funds actually have a pretty high turn-over rate.
What's an example of a position that they completely liquidated?
Very much disagree, a speculator can be investor. See the definition of the term on Investopedia.
> Speculators are sophisticated investors or traders who purchase assets for short periods of time and employ strategies in order to profit from changes in its price.
> Speculators are sophisticated investors or traders who purchase assets for short periods of time and employ strategies in order to profit from changes in its price.
Then perhaps we should object based on the adjective sophisticated.
If this article isn’t this, I don’t know what is. I don’t know why people aren’t more dumbfounded that the market is at all time highs when the world is dying and no one has worked for a year.
> As the story goes, one day in 1929, Joe Kennedy is getting his shoes shined. The boy began to give stock tips as he polished Kennedy's oxfords. In that moment, it struck Joe that he needed to leave the market. He reasoned, famously, if shoeshine boys have an opinion on stocks, the market is clearly, dangerously popular. Supposedly, he pulled out not long before the stock market crash that led to what we know today as the Great Depression.
> As the story goes, one day in 1929, Joe Kennedy is getting his shoes shined. The boy began to give stock tips as he polished Kennedy's oxfords. In that moment, it struck Joe that he needed to leave the market. He reasoned, famously, if shoeshine boys have an opinion on stocks, the market is clearly, dangerously popular. Supposedly, he pulled out not long before the stock market crash that led to what we know today as the Great Depression.
By July I realized a couple things (and adjusted my investments accordingly):
1) The shifts to online delivery of food and products was 10 years of change pulled forward in 6 months
2) Unprecedented liquidity of the money supply is giving any individual or business access to $$ to invest, spend, etc. It's unequal, but it's there and it's driving the economy right now.
3) We're witnessing one of the greatest wealth transfers in the history of our country, from the less fortunate to those with means, from stagnant businesses holding on to dear life to the quick and nimble, and from the legacy businesses to the already prepared distribution channels.
4) The fundamental shift of where people work has been upended, resulting in massive dislocation of where dollars flow to residential and commercial real estate.
Those that study economics must have thought they stumbled into a gold mine of topics to study this year. It's absolutely fascinating and heartbreaking at the same time.